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Category Archives: DIP

Rue21 today filed for Chapter 11 in bankruptcy court in Pittsburgh, Pa., the company announced.

The company said that in connection with the filing it had entered into a restructuring support agreement with lenders holding 96.8% of the company’s secured term loan and 60.2% of the company’s unsecured notes.

Apax Capital, the company’s equity sponsor, is also a party to the RSA.

According to a statement from the company, the RSA “contemplates, among other things, an emergence from Chapter 11 proceedings in the fall of 2017 with a significantly deleveraged balance sheet.”

In addition, the company said that it “may evaluate additional store closings as it continues to manage its real estate lease portfolio.” As reported, the company announced last month that it had begun the process of closing 400 underperforming stores (out of a total of 1,179 locations).

Also in connection with the Chapter 11 filing and the RSA, the company said that its existing ABL lenders agreed to provide it with a $125 million ABL DIP to replace the company’s existing ABL facility (which has about $72.2 million currently outstanding, according to court documents), and that a subset of its current term lenders agreed to provide it with $150 million of term DIP financing, to be made up of $50 million in new money and $100 million in a partial roll-up of existing term debt (which has roughly $521 million outstanding).

RSA terms
Under the RSA, the $50 million of new term debt under the DIP is to be converted into an exit facility upon emergence (five year term at L+1,250), while the $100 million roll-up portion would be converted into 77% of the equity of the reorganized company, provided the company’s unsecured creditors accept the proposed reorganization plan.

Pre-petition term lenders, meanwhile, would receive 19% of the reorganized equity, again provided unsecured creditors accept the proposed plan.

For their part, if unsecured creditors accept the plan, they would receive 4% of the reorganized equity along with 100% of the proceeds of certain avoidance actions that would be preserved under the plan.

If unsecured creditors reject the plan, however, they would receive no distribution, and the equity distribution they would otherwise have received would be split 3% to DIP term lenders, increasing their equity distribution to 80%, and 1% to pre-petition term lenders, bringing their equity distribution to 20%.

According to court filings, the opportunity to participate in the term portion of the DIP was offered to all pre-petition lenders.

DIP terms
Bank of America is the administrative agent and collateral agent under the ABL portion of the DIP facility, with Wilmington Savings serving as administrative agent and collateral agent for the term debt. The facility matures on Oct. 31.

Interest for ABL borrowings would be at L+275, court filings show, while interest for the term debt would be at L+1,200 for the new-money portion and L+462.5 for the roll-up term portion. Neither rate includes a LIBOR floor.

The new-money term loans would be issued with a 2.5% OID, and carry, among other fees, a 3% put option premium to initial lenders, according to a term sheet attached to the RSA.

As for milestones, the DIP requires, among other things, that the company file a proposed reorganization plan and disclosure statement within 15 days of filing Chapter 11 (May 31), and that the bankruptcy court approve the disclosure statement within 50 days of the petition date (July 5) and confirm the reorganization plan within 105 days of the petition date (Aug. 29).

The DIP milestones also provide for an alternate timeline if the bankruptcy court fails to approve the proposed disclosure statement within the allotted 50-day period. Specifically, in that case, the company is required to file a sale motion within 55 days of the petition date (July 10), obtain bankruptcy court approval of sale and bidding procedures by within 75 days of the petition date (July 30), obtain court approval of a sale within 110 days of the petition date (Sept. 3), and close the sale within 120 days of the petition date (Sept. 13).

The company said it retained Kirkland & Ellis as its legal advisor, Rothschild as its investment banker and financial advisor, and Berkeley Research Group as its restructuring advisor. — Alan Zimmerman

A Deutsche Bank–led arranger group is holding a lender meeting on Tuesday, July 12, at 1 p.m. EDT to launch the DIP refinancing and exit loan for Texas Competitive Electric Holdings (TCEH). The bankruptcy court overseeing the Chapter 11 proceedings of Energy Future Holdings on June 24 approved the company’s proposed $4.25 billion DIP refinancing/exit facility for its so-called “T-side” unit, TCEH.

As reported, the TCEH transaction will include a $750 million revolving credit, a $2.85 billion term loan B, and a $650 million term loan C maturing Oct. 31, 2017. The term loans would roll into seven-year facilities on exit. Of note, the TLC cash is collateralizing LC facilities, sources said.

As also reported, the existing TCEH DIP facility is set to expire on Nov. 7, but the company has said in court filings that it anticipates that TCEH may require DIP financing beyond that date, in addition to exit financing upon emergence. As a result, the contemplated financing offers the company the option to enter into either an exit facility or a replacement “DIP roll” facility that would convert into an exit facility upon emergence. The bankruptcy court in June approved TCEH’s proposed disclosure statement, clearing the way for a creditor vote on the proposed reorganization plan for the unit. A confirmation hearing on the proposed reorganization plan is currently set for Aug. 17. — Chris Donnelly/Alan Zimmerman